Get moving with rescue fund, ECB's Draghi urges eurozone leaders

ECB president Mario Draghi is frustrated at lack of progress with the EFSF. Photograph: REUTERS

European Central Bank president Mario Draghi sought to deflect calls for more action to help beleaguered eurozone countries by calling for member states to speed up implementation of the bloc's existing rescue fund.

Showing exasperation at slow progress in kick-starting the €440bn European Financial Stability Facility, Draghi said EU leaders had decided more than a year and a half ago to launch the fund, then to make the full guarantee volume available and, four weeks ago, to leverage its resources.

"Where is the implementation of these long-standing decisions?" Draghi asked in a speech to the European Banking Congress in Frankfurt.

Despite pressure from leaders in Europe and across the world – from David Cameron to Barack Obama – the ECB has resisted calls for a "shock and awe" intervention in the bond markets to support countries such as Italy and Spain, which have seen their borrowing costs soar in the past two weeks. The ECB says it should not be asked to go beyond its mandate of delivering price stability.

Governments set a December deadline for bolstering the EFSF at what was seen as a pivotal summit last month, but since then the proposals have been overtaken by events. Market pressure and scant investor interest exposed the fund's weakness, leading to the calls for more direct action.

Greek finance minister Evangelos Venizelos joined in the debate, telling a news conference: "The ECB, like every central bank, must help the eurozone overcome the crisis, in every possible way."

He did not elaborate, although quantitative easing – effectively creating money to buy bonds outright in the secondary market, a move already made by the US and Britain – is being talked about.

France and Germany, Europe's two central powers, clashed earlier this week over whether the ECB should intervene more forcefully to ease market tensions. Yesterday pressure on bond yields eased, with the cost of benchmark 10-year yields dropping for both Italy and Spain as markets enjoyed a calmer day.

A Reuters poll of 50 bond strategists in Europe and the US put it as an even probability that the ECB will, despite its resistance to the idea, soon bow to pressure and opt for quantitative easing.

That would mark a controversial break from its existing policy, whereby the ECB offsets bond purchases by draining liquidity from the system in separate operations.

Bundesbank chief Jens Weidmann, a powerful voice on the ECB's 23-member Governing Council, sought to put the onus on governments to tackle the crisis, rather than the ECB. He echoed Draghi's call for governments to implement crisis-fighting measures and said they should keep their hands off the independent central bank.

"The necessary measures are obvious and uncontested," he said. "The only thing that we are short of seems to be their implementation. The current approach to crisis management has not helped to remedy this. Against this backdrop, it might be consoling to take a look at the German experience, because it illustrates how reforms eventually pay off."

Meanwhile, Hungary has entered talks with the International Monetary Fund and the European Union to secure a financial safety net that it hopes will protect it from the eurozone debt crisis.

The economy ministry in Budapest said the deal would allow Hungary to concentrate on boosting economic growth, which has been falling as western Europe, which buy most of Hungary's exports, struggles with lack of growth.

Prime Minister Viktor Orban and the rest of the government have been outspoken in their criticism of the IMF, regarding the Washington-based fund as a hindrance to the introduction of "unorthodox" policies to increase budget revenues without unpopular austerity measures.